An Overview of Construction Equipment Rental Business in India

India is emerging and the fastest-growing economy in the world, expected to become the third-largest construction market globally by 2022. Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from the Government for initiating policies that would ensure time-bound creation of a world-class infrastructure in the country. We have tried here to provide a snapshot of the Construction Equipment Rental Business in India. Infrastructure sector includes power, bridges, dams, roads and urban infrastructure development. In 2018, India ranked 44th out of 167 countries in the World Bank’s Logistics Performance Index (LPI) 2018.

Indian Construction Equipment Market Size

The Indian Construction Equipment market has been on a major upswing since 2015 with the sales of construction equipment growing by 24% and crossing the 90,000 unit sales milestone for FY 2017-18 propelled by significant tailwinds with the current government’s laser-sharp focus on infrastructure development and a broad-based macroeconomic push backed by the pursuit of a favorable policy regime has led to India becoming one of the fastest infrastructure developing country in the world with almost 27 km of highways being developed on a daily basis across the country.

Also, the Foreign Direct Investment (FDI) received in Construction Development sector (townships, housing, built-up infrastructure, and construction development projects) from April 2000 to March 2019 stood at the US $ 25.05 billion, according to the Department of Industrial Policy and Promotion (DIPP). The logistics sector in India is growing at a CAGR of 10.5 percent annually and is expected to reach US$ 215 billion in 2020.

As per the budget FY 2018-19, the total estimated capital expended on the infrastructure sector was INR 5.97 trillion compared to INR 4.94 trillion in FY 2017-18. The Government of India has approved a development plan of the total investment of 6,920 billion for the construction of 83,677 km of roads in five years. These will increase the requirement of capital goods on a large scale and also will create the requirement of large no. of contractors for executing these projects.

Construction Equipment Rental Business – An Opportunity

In India, the construction equipment leasing is still in budding stage and just accounts 6-8% of the overall construction equipment market. Whereas the global average for leasing is 50-60% of the overall construction equipment business.

India is a growing economy with huge urbanization and has so much more to build. The construction equipment leasing business is the upcoming business sector in which suppliers and other professionals can rent out unused or idle equipment to other contractors and professionals. But it has a lot of challenges to be overcome is an unorganized sector. The major challenges are unprofessional vendors, delayed projects, breakdowns of equipment, and no immediate alternatives in case of breakdowns.

Recently some Start-ups have come up to change its game dynamics with solutions to the common problems.

These start-ups have encased the problems into a business idea, the crux of the idea is to lease the construction equipment as having ownership of construction Equipment incurs heavy cost to companies like operating, depreciation and maintenance costs. The small companies which are short of capital cannot buy construction equipment because of small volume and uncertainty of projects. So to have the optimization of cost and time, leasing of this equipment is done to small or medium construction companies.

Indian market being competitive, as many start-ups have entered this sector, the key to success for any new entrant is to have unique and distinct features. Some of the features such as having a structured process with end-to-end transactional tracking, competitive pricing with productivity and operations monitoring mechanism, flexibility in leasing hours for any equipment. The construction machinery can be idle at your vicinity, but if not listed on any online platform cannot be discovered for the purpose. So the start-ups have come with an idea of an online marketplace for construction machinery. ​

Types of Construction Equipments Available on Rent

Earth-moving Equipment

Earth-moving equipment the equipment includes backhoe loaders, wheel loaders, steer loaders scrappers, excavators, bulldozers and tippers. All this equipment holds a large share in this segment and accounts for up to about 70 percent.

Conclusion

In India, nearly $2300 million worth construction equipment are sold every year, out of which 7-8% is sold to the rental companies. The employment directly or indirectly related to construction Machinery is about 3 crore people in India. As per the current scenario, the dominating Indian rental companies are mostly Start-ups and focus on regional areas. The rental business is quite organized and is expected to grow year on year in days to come in India.

Some big construction contractors have also started to rent the machinery when idle for them. Surplus equipment is adding positive indices in the growth of the rental business. We hope for the great business opportunity in the construction equipment rental business in the coming days.

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